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San Francisco: Good News & Bad News

Here are some quick observations from an exciting and busy trip to San Francisco with Vaughan from Vend, specifically for other kiwis who are also working on a new technology venture and aspire to do the same…

First, the good news: It’s not nearly as hard as you might imagine to get to San Francisco or Silicon Valley and meet with people that can help with your venture. I don’t mean physically (it’s a single flight – about 12 hours – and you’re there). I mean mentally. We have all convinced ourselves that we need to qualify before we belong in the US. Ideally starting somewhere safer and easier, like New Zealand. Locals there don’t think that.

However, there is also bad news: Being a kiwi start-up doesn’t make you special. Nobody will care that you had to fly a long way to get there, or that you talk funny (we met people originally from India, Australia, Israel, Eastern Europe and Florida – everybody talks funny!) You will have to do the hard yards and earn it just like everybody else there does.

In Palo Alto we met with Elizabeth and Dan from ScienceExchange.com, the day before they presented to potential investors at the Y Combinator Demo Day. I told them that many people back home think we need a Kiwi version of Y Combinator. Their response to this helped to put into words something I’ve been struggling to articulate for a while: There is already a Y Combinator for New Zealanders … it’s Y Combinator … you just need to apply, and if you’re good enough you’ll get in. And if not, why should an equivalent program in NZ be interested in you when they are not?

Later in the day, down the road at Stanford we got to see Vend in use at the Student Store and spoke to some happy customers there. They found us on Google, signed-up for a trial and implemented it without ever talking to us in person. They think Vend is great POS software. We’re excited to have them as a customer which has opened other doors for us. Everybody is happy.

So, good news and bad news – it’s much easier and much harder than you think.

12 thoughts on “San Francisco: Good News & Bad News”

Re: Y-Combinator in NZ. Whilst YC is available to NZers I would still like to see alternative startup “accelerator” infrastructure developed in NZ. To my mind the extra elements we need is a range of good filters for vetting Market-ready ideas, easy access to early-seed capital, & a mentorship program supported by experienced NZ entrepreneurs. Together with energising co-working environments & collaborative networks we can strengthen our capacity to launch more NZ startups.

I’d like to see a local alternative, probably out of a misguided sense of patriotism though. I can’t really articulate this very well, but I wonder how many kiwis, like me, see the physical distance as a limiting factor? I think it’s daunting enough to invest yourself in a start-up venture when you’re at home and have your support networks around you, vs having to do it halfway around the world.
I know that’s a narrow view, and totally at odds with the idea of the internet breaking down international boundaries, but I have a hard time letting it go.
I also quite like the idea of kiwi investors getting into kiwi start-ups, so that when they go big on the export marked, all the benefits are flowing back into NZ. That might be an overly simplistic view, but it’s not really my area of expertise.

Another insightful post Rowan. I agree with the first comment for all the reasons given. Kiwis have a distinct way of doing business and we should encourage and grow this as much as possible with resources at home first. If we are just going to say use YC then why don’t we just use the States for everything? Lets close down the Hobbit and film it in Hollywood, lets shut the Universities and if you want to attend then apply for Harvard. We don’t do that because what we have here is unique and an “accelerator” in NZ would be as well. Unless people think we don’t have the know-how, expertise, or enough successful entrepreneurs? But I think we do.

Look at Mitch’s list: a range of good filters for vetting ideas, easy access to early-seed capital, support from experienced entrepreneurs, co-working environments & collaborative networks … in terms of tech start-up you can tap into all of these things much more easily over there than you can over here, so what’s our competitive advantage?

Depends on which YC you’re talking about here. As someone who has been through the YC interview, had a few year relationship with a couple of YC companies and met PG in 09 and 11, I think YC’s role has changed significantly in the last 5 years. New Zealand needs our own YC07 instead of YC12. Allow me to explain.

For the first a few batches, PG and team invested lots of time, care and attention with each company. It feels like gardening. One hour walk wasn’t something that rare. PG quite often uses the product quite extensively. (Like reddit.)

When Tim and I went to YC interview this Apr, the story has changed significantly. The office hour slot has decreased from 1 hour to 10 minutes.
In PG’s own words http://news.ycombinator.com/item?id=2488494
We care a lot more about the founders than the idea, but the idea still matters somewhat. And as we get further along, the differences between groups get smaller, so variation between ideas tends to account for more of the variation between groups. By the time we get to interviews we’ve narrowed the pool more than 10x, so we’re basically choosing between good people with good ideas and good people with bad ideas.
(Well, he went on to say trunk.ly wasn’t a “bad idea” but you get the idea)

I am advising two startups in the last 6 months here in Dunedin, I can see lots of 1M to 30M business problems that are worth solving but the startup here needs much closer contact and care instead of just a launching pad.

Rowan re your question “What would be “unique” about an NZ accelerator”?

The issue isn’t about competitive advantage in the sense that “acceleration” here in NZ needs to compete with that in the Bay. To my mind the question is how can NZ build its capacity to leverage its talent to build our individual & national propserity.

I think an important part of the answer to this question is an infrastructure that supports startups with promising potential to get to market as efficiently as possible. As I mentioned above I think that crucial elements of this are

(i) early discernment about what is worth supporting,
(ii) access to early-seed money to support entrepreneurs to get started,
(iii) mentoring & advice from seasoned entrepreneurs, &
(iv) building & leveraging relationships with the key people to launch & grow a business. I also think that
(v) a co-working space to house entrepreneurs is the best environment to support collaboration & give & get the best co-inspirational energy & support.

I think this infrastructure is a critical foundation for supporting NZ entrepreneurs & not something we want to outsource, in the same way that a business doesn’t typically outsource the development of its core IP to 3rd parties. Our entrepreneur/innovation infrastructure is “core IP” for our country.

I also think that a NZ-based infrastructure is going to be able to leverage our national pride & identity to extract more from its constituents (the fiercely proud kiwi in me also happens to think we could do it better here). Wherever you’re going you start from where you are & we start from here. We need this here in NZ.

Working on the assumption that YC is a idea, some thoughts on why NZ should be looking at such a thing:

1. As a previous commentator pointed out, why bother with other universities, if you are bright enough you’ll get into Harvard, otherwise don’t bother. Wanna be an All Black, you either play for your school 1st XV get selected straight into the AB’s or you go home, lets not worry about training camps, coaching clinics etc. What is wrong with giving people some training in how to start and succeed in the tech industry – or at least how to fail quickly and get onto something else.

2. NZ does have unique differences to being based in California. Would Trade Me have been supported by Y Combinator? An auction site focussed on a NZ only market? They might have seen the great team and backed it, they might have helped it go global, but I fancy chances are they would have forced a pivot, which I can see from your Twitter feed you think is a bit of a joke. So whilst I have a preference for companies going global there are ideas that are very NZ focussed
, that are not going to be attractive to people overseas. Do US people understand AgriTech etc in the same ways?

3. There are a number of reasons people may not want / be able to go to Y Combinator. Criminal record would make it difficult to get into the US. Maybe someone has a mortgage, debts etc and still needs to work while proving their idea. Maybe someone has a wife / husband and three kids. Saying you are only worthy of being in business if you are willing to drop everything in your life, move to the US for three months, which is really going to turn in a year / forever is a bit of a tough call. And then NZ has lost them. Where are they going to start their next venture and the one after that – probably not back here.

4. Budding entrepreneurs are asking for this. People want help, guidance, mentorship, education – and money. The thing that appears to be lacking is the people who have had the good exits being willing to put themselves in the position to help. I’d like to see more successful NZers trying to help other NZers, en masse, not just via a couple of key investments. I see Dave Moskovitz is about to do something in Wellington, funny that an American sees the opportunities and wants to help, but Kiwis do not.

I am sure the really good entrepreneurs will make it no matter what. Plenty of billionaires left school at 15. I’m sure several All Blacks didn’t start playing until they were 18 etc etc. Drive and ambition will get you a long way.

They’re the ones we read about and admire (or in NZ knock down as part of our tall poppy syndrome).

But I know plenty of millionaires that actually led quite normal lives, they weren’t rich at 21, they weren’t at 40, but they started to slowly build things and at 50 or 55 are / were very successful. They worked hard, very hard, but they didn’t have to work 16 hours a day every single day of their life. They didn’t have to give up their families to be successful. They never put every last penny on the line to be successful. They managed to maintain a relatively normal life. They may never had the massive exits, or companies that employed 1000’s of staff, but they often did build companies that employed, 10, 20 or 50 people. They paid NZers good salaries, they paid tax to the Government.

It has to be easier to create twenty 50 million dollar companies than it is to create one 1 billion dollar one.

So I believe a YC clone tailored to the NZ market is something we should all be striving to achieve.

What I find interesting is that none of the people advocating for a ‘z combinator’ here are giving reasons that either founders or investors would want such a thing. Instead the arguments are largely that “if such a thing existed, the positive externalities would be considerable”. Let’s take it as given that if we could magically have an engine generating 50m businesses then NZ as a whole would be better off. I’m a cynical person at the best of times but I simply can’t see how this idea would stack up for either of the core constituencies.

As a founder, why would you get involved in an ‘also ran’ incubator. The most common benefit which needs debunking up front is office space. We have 4 companies and 3 charities sharing our office space and there are dozens of desks available in lots of other buildings around town. It’s a renter’s market! You don’t need to be in an over-priced serviced office with a bunch of other suckers in order to launch your company.

I’d also push back on issues like access to seed-capital and ‘vetting’ of your idea. I’m probably blinkered by my own confirmation bias but I’ve yet to see an entrepreneur with a really kickass product fail to find funding. NZ has a very active angel investment community and good ideas seem to have no difficulty attracting money. In fact, I’ve seen some amazingly stupid shit attracting money.

Also look at the suggestion from the POV of a potential investor. You’re already admitting up front that the truly promising businesses will go elsewhere for their funding which knocks a big chunk off your expected ROI. So you’d get the option to have a diversified exposure to a group of companies which didn’t pass the vetting process for a series of other, better ranked, incubators. This doesn’t sound particularly compelling.

You’re unlikely to attract the money and advice of successful entrepreneurs to this kind of vehicle, they’re already making investments and advising companies on their own. It seems more likely that you’ll get investment from people with little relevant experience who want to ‘have a flutter’. So instead of having a who’s who of the tech entrepreneur community you’ll likely have a who’s who of the property investment and dairy farming community with some lawyers and accountants thrown in for good luck.

Looping back around from the founder’s perspective, your crack team of advisers are likely not going to be of much assistance unless your startup involves milking cows, depreciating assets or converting a carport into a garage.

So from a founder’s POV it only makes sense as a fallback option if you can’t raise money elsewhere, and from an investor’s POV it only makes sense if you can’t get access to your own deals already.

Call it a chicken and egg problem, but I think it’s more a fundamental flaw when neither of the key constituencies need the service and the only people with additional benefits are ‘the rest of us’

I don’t pretend to have any of the answers but I know what _I_ need and have needed in the past. And I think that is the problem – There is no one thing that is a silver bullet. Some people think seed funding is important but in my mind you should be able to build a product and get paying customers on basically $0 (that’s what we did) and if you are building a tech company you shouldn’t be outsourcing your tech…

In my particular scenario it is getting from a custom base of ~20 to a customer base of 200 so it becomes self supporting. I personally can’t just take off to the US without my family (soon to be 4 of us) as there are mouths to feed. So what do I need to get there? If it is money then really the help is around getting ready for money. That isn’t spending time in an incubator but more about advice, coaching, modelling, etc. I’m sure Rowan and Vaughn have been through a lot of this in the last few months?

Related Note: My first startup idea I had 8 months off working on an events platform for SME’s. I learnt a lot – mainly that I shouldn’t program and having a team is a good thing. I think I could have done with some form of support network then. I was a complete rookie and when I look back I think about how I could have done things better. Maybe there are a bunch of people out there like that who need something to set them on there way? I don’t know what that ‘thing’ but I don’t think it is a Y-Combinator or and ICEHOUSE or BizDojo.